(Bloomberg) -- An emergency measure allowing Colombia's government to take equity stakes in private companies opens the door for a bailout of the nation's largest airline, Avianca Holdings SA, which declared bankruptcy last month amid an unprecedented downturn in travel.
The new regulation, which permits the government to take minority positions in companies that have been impacted by the sharp economic downturn, “can be a lifesaver for Avianca,” said Carlos Enrique Rodriguez, director of equity research at Ultraserfinco SA, a brokerage.
The decree announcing the measure, which was posted to the presidency's website Friday, didn't say how much the government is willing to invest or identify specific companies that may be eligible. But Finance Minister Alberto Carrasquilla said last month that the government would look to help the carrier “in some way.” Shareholders may be required to buy back the government stake after a certain time, according to the decree.
A company spokeswoman didn't immediately respond to a request for comment.
Avianca filed for Chapter 11 protection from creditors in New York in May after grounding its fleet as Latin American countries closed down to stem the spread of the coronavirus. Colombia prohibited air travel starting in March and plans to restrict international flights through August in one of the region's most onerous bans.
Avianca plans to continue operating while it restructures under bankruptcy protection, once governments lift bans. A state investment, which may only come after a restructuring, would help the company keep operating, paying pilots and save jobs, Rodriquez said.
While Latin America has been particularly hard hit by the downturn in air travel amid the pandemic -- with flights falling more than 90% since the start of the year -- governments have provided scant support to carriers. Avianca's competitor Latam Airlines Group SA, the region's largest airline, was also forced to seek bankruptcy protection.
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